Economics

This is what happened to the oil price-macroeconomy relationship

Article Abstract:

Evidence since 1983 supports the observation that disruptions in world petroleum supply are a vital factor in the recession that followed in the US. This is due to the changes in investment decisions generated by widespread concern about the price and availability of energy during oil crises. A majority of the quarterly oil price increases that have occurred since 1985 were actually corrections to even bigger oil price decreases during the previous quarter. Recent data supports the historical correlation between oil shocks and recession, particularly in the US.

What happened to the oil price-macroeconomy relationship?

Article Abstract:

The state of the US macroeconomy is being somewhat attributed to the Organization of Petroleum Exporting Countries' (OPEC) dramatic crude oil price increases in 1973 and 1979. Although some contend that oil prices do not Granger cause many US macroeconomic indicator variables in data after 1973, an examination of sample stability issues, the endogenous characteristic of oil prices and the misrepresentation of the form of the oil price interaction shows that OPEC price increases do seem to have impacted on the macroeconomy of the nation.

United States, Economic policy, Organization of the Petroleum Exporting Countries

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Article Abstract:

The arguments that oil price changes remain significant to the macroeconomy and that a historical correlation exists between oil shocks and recessions seem to be flawed. Since the arguments' predictive authority comes from pre-1986 and pre-1973 choppy data, analysis of the best oil price transformation should require cross-sectional data on industries, regions or countries. It is also suggested that a study of the effects of oil price decreases is most helpful in uncovering structure.